OPEC has raised its 2023 forecast for global oil demand growth in its first upward revision for months, citing China’s relaxation of COVID-19 restrictions and slightly stronger prospects for the world economy.
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Global oil demand will rise this year by 2.32 million barrels per day (bpd), or 2.3 percent, the Organization of the Petroleum Exporting Countries (OPEC) said on Tuesday in a monthly report. The projection was 100,000 bpd higher than last month’s forecast.
Higher demand could support oil prices that have held relatively steady since the end of last year and stand at a little less than $86 a barrel. OPEC had kept its 2023 demand growth forecast steady for the past two months after a series of downgrades.
“Key to oil demand growth in 2023 will be the return of China from its mandated mobility restrictions and the effect this will have on the country, the region and the world,” OPEC said in the report.
“Concern hovers around the depth and pace of the country’s economic recovery and the consequent impact on oil demand.”
OPEC expects Chinese demand to grow by 590,000 bpd in 2023, up from last month’s forecast at 510,000 bpd. China’s oil consumption dropped for the first time in years in 2022, held back by its COVID containment measures.
The OPEC report was upbeat on economic prospects, nudging up its 2023 global growth forecast to 2.6 percent from 2.5 percent, though it said that a relative slowdown remained evident and cited high inflation and expected further increases to interest rates.
Other upside factors for oil are the likelihood that the US Federal Reserve will manage a soft landing for the US economy and further commodity price weakness, OPEC said.
On the flipside, it noted a number of factors that could curb economic growth and oil demand.
“Downside risks are apparent and may include further geopolitical tensions in Eastern Europe, China’s ongoing domestic challenges amid the pandemic and potential spillovers from China’s still fragile real estate sector,” OPEC said.
The report also showed that OPEC’s crude oil production fell in January after the wider OPEC+ alliance pledged output cuts to support the market. Output declined in Saudi Arabia, Iraq, and Iran, offsetting increases elsewhere.
OPEC said its crude oil output in January fell by 49,000 bpd to 28.88 million bpd.
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